It's Pity Party Time

Break out the violins for Wall Street.

While Wall Street investment banks and other financial firms make headlines for the millions paid out to certain executives, more modest bonuses go to workers from human resources representatives to secretaries as well as employees who actually made money for their companies last year.

There's an implied sneer in that, at "workers from human resources representatives to secretaries" as people who don't make money for their companies. But let's turn it around... Let's say, "Even in the financial industry it's okay to give bonuses to the employees who made money for their companies last year... but do we need more than one hand to count them?"

Jason Weisberg, vice president of the Wall Street brokerage Seaport Securities, said bank employees count on performance bonuses like salesmen count on commissions.

"What are you supposed to pay them?" Weisberg asked. "Or are you not supposed to pay them?

Salesmen count on commissions from their sales. If they don't make sales, believe it or not, they don't get commissions. Similarly, if we're going to refer to "performance bonuses", they perhaps should be somehow related to... performance?

And if you don't pay them, how do you expect that employee to stay employed at that company?"

Well, if they're not performing... do you really care? And with financial industry employer's shedding employees like leaves, odds are that only those employees who actually performed will be marketable - and their performance bonuses are defensible.

"The reality is good people will always be able to get a job someplace else if they are unhappy," Hall said. "So do you want to own stock in a company that is filled with people who can't get a job anywhere else?"

You mean, the "good people" who lost hundreds of billions of dollars, and caused the value of my stock to plummet to the point that the only reason it has any value is... not even the bailout money it has already received, as that hasn't fixed things, but the expectation that hundreds of billions in additional taxpayer dollars are on the way? No, I don't want stock in that company, but it's not because I'm concerned that the "good people" might leave.... Stock in the company that's doing well enough to poach them, on the other hand....

This is funny - a Wall Street veteran states the obvious:

"You could absolutely make an argument that we shouldn't be getting any bonuses this year," said the worker, who also requested anonymity because of his company's restrictions on talking to the media.

"If you are going to have a pay-for-performance system, you have to take the lows with the highs," he said. "This just happened to be a really low year."

It's only the guy who speaks out against bonuses, it seems, who "can't" use his name.

Regional Expressions

Oops?

The producers of “Idol” apologized Thursday on behalf of its judges, who apparently misinterpreted what a contestant in Louisville, Ky., said after a failed audition.

On his way out, Mark Mudd said: “Take care and be careful.”

Paula Abdul and Simon Cowell took that as a threat.

Abdul scolded Mudd, telling him: “You don't say that to people, ‘Be careful.' That's just not a normal thing to say.”

It turns out “Be careful” is a regional parting expression.

But really, it seems fair to ask, why didn't he say something that theater people couldn't possibly take as a threat - like "Break a leg"?

"Nobody Knows What These Assets Are Worth"

You've heard that one, right? That banks are sitting on trillions of dollars of securities, state on their books that those securities have a specific value, but that "nobody knows" what they're actually worth? Even though, not so long ago, those same securities were traded on the market and everybody "knew" what they were worth?

Let's be honest for a moment: It's easy to figure out what the securities are worth. Put them up for sale. The price somebody is willing to pay for them? That's what they're worth. The protest, "But once financial markets settle down and the economy becomes more normal, they could be worth a lot more"? Sure. But the person who is buying the securities in the current market is considering that when setting a price. Gasoline may be back up to $4/gallon next fall; but that doesn't mean I'm going to buy gas at a station that wants to charge me $4/gallon today. (If I believe gas is going to go up to $4/gallon, I might buy futures, but I'm not going to buy them at $4/gallon.)

We're caught between financial institutions that claim, "We don't know what these securities are worth" because they don't want to establish a market price that would render them insolvent, and a government hoping to rescue those same financial institutions from insolvency without creating a massive public uproar that they're paying tens or hundreds of billions of dollars over market for some extraordinarily risky securities. And we're supposed play along because the consequence of establishing a market price could make everything a lot worse.

A Lunatic Investigation....

Hey, I have an idea. You know how people always complain about "letting the lunatics run the asylum"? Well, what proof do you have that it would actually be all that bad? We're making rash assumptions based upon logic, common sense, law... but is that fair to lunatics? So here's what we do:

We create a commission, but we don't let psychiatrists, legal experts, or sane people lead the commission. If we did that, the lunatics might denounce it as a witch hunt. Instead we find and appoint prominent lunatics to head the commission. We can appoint some of the sane people and experts also, but as window dressing. We wouldn't want to demonstrate bias by letting them run the show or influence the panel's findings.

Sure, some sane people will complain about the heavy presence of lunatics on such a panel. But the alternative is no panel at all. Why? Because I said so. I mean, in fact, sane people, legislators, psychiatric experts could hold such a panel any time they wanted to, but shut up - I'm pontificating here. So when I say "surely any panel is better than where we’re headed: which is no investigation at all", don't question me.

And I'm confident that when the panel concludes its investigation it will issue a stinging repudiation of letting inmates run asylums that no one could lightly dismiss. And we can use that consensus in the future - because laws, the constitution, sound public policy... if the lunatics take over, they could all go out the window. If we form a consensus on these issues, and by that I mean letting the lunatics decide what we should do, we'll be better off when the lunatics once again rule! And the rest of the world will once again respect us!

Making the "Bad Bank" Not Quite As Bad

If we must have a 'bad bank'... Dean Baker proposes a provision that will keep taxpayers from being completely soaked when they buy up toxic securities from our nations bankrupt banks:

We can just attach a clawback provision, under which the bank will be forced to make up any money that the bad bank loses on their junk, plus a penalty. For example, if Citibank sells $100 billion in junk, and the bad bank ends up selling it for $70 billion, then Citibank has to cover this $30 billion loss, plus a 20 percent penalty ($6 billion). This structure will both ensure that Citibank doesn't run off with our money and also discourage banks from trying to mislead the bad bank about the true value of their junk. (Senator Dodd proposed a similar measure in the debate over the TARP.)

Under the Bush-Paulson plan, we gave away a ton of free cash, no strings attached, and we were rewarded with... Yeah. Enough of that.

Note, though, that an honest valuation won't make the banks solvent.

They're Not Actually Smoking Crack, You Know....

When people like John Bolton start suggesting that Gaza be placed under Egyptian occupation control, your initial reaction may be, "What's he smoking? Why would Israel ever allow Egyptian troops on the streets of Gaza? Why would the Palestinians go along with such a thing?" But that would be missing the point. People like Bolton don't put stuff like this on the editorial page of the Washington Post because they're pulling wacky ideas out of thin air - they are attempting to prepare the public for an outcome that is acceptable to a particular political faction - one that disfavors ever allowing a genuine Palestinian state, but wants to remove the burdens of occupation from Israel.

Thanks to Carter, a president Bolton no doubt loves to malign, Israel and Egypt have several decades of stable peace. They're both highly dependent upon U.S. aid, and Egypt would certainly love to get more. Egypt has experience oppressing controlling its own Islamic factions, including the Muslim Brotherhood. Egypt may not have much concern about Israeli politicians blaming every rocket that flies out of Gaza on Hamas, but as an occupier they would not want every rocket that flies out of Gaza to be blamed on them. So Israel gets more peace, Egypt gets more money, the Palestinians get more oppression, and everybody... everybody who matters to Bolton... is happy. If he can get Jordan to take over managing and controlling the Palestinian population on those remnants of the West Bank Israel chooses not to keep, all's the better. He concedes,

This idea would be decidedly unpopular in Egypt and Jordan, which have long sought to wash their hands of the Palestinian problem.

That's more than a bit dishonest. Jordan has a very large Palestinian population. In the past, this led to an ugly and violent confrontation between Jordanian forces and the PLO (September 1970, or "Black September"). It's difficult to conceive of a Jordanian occupation of the West Bank that would not ultimately precipitate similar conflict. (But what does Bolton care?)

Bolton refers to this as a "Three State solution", but it's patent that he doesn't actually give two figs about the Palestinians, and that it's actually a "one state solution with different occupying powers for the Palestinians."

One place to avoid problems is dispensing with intricate discussions over the exact legal status of Gaza and the West Bank.

Or as I suspect he puts it in less polite company, "Palestinians? F--- 'em". People more honest than Bolton who adore this "solution" are more accurate in their description - see, e.g., Daniel Pipes:

The National Post cleverly dubs my plan (in its title to this article) the "back-to-the-future option," but I like best the name bestowed on it by blogger Mary P. Madigan: "the no-state solution." Perfect.

Although analysis like this is typical of the garbage that passes for "scholarship" at the American Enterprise Institute, that's not the same as saying Bolton has no valid points. It does make sense to tie Gaza into Egypt's economy, particularly given how Israel has frozen it out of the Israeli economy - it's only other neighboring country. The same holds true for the West Bank and Jordan - although there are some real structural difficulties in separating the West Bank from Israel, worsened if Israel doesn't remove most of it settlements (and, believe me, removal of settlements is not part of Bolton's plan - he doesn't even mention them.) If we ignore religious and ethnic issues, it would make far more sense to fully incorporate the West Bank and Gaza into Israel; but that's not going to happen. Even with a tunnel connecting the two territories, it's hard to imagine the West Bank and Gaza forming a viable economy as an independent state.

Today, along comes Thomas Friedman with what he no doubt thinks is a clever twist on things - The 5-State Solution. In the column, Friedman pretends that he's King Abdullah II, proposing how the conflict can end... without a Palestinian state. This is a "five state solution" to Friedman as it involves Israel, Egypt (to occupy Gaza), Jordan (to occupy the West Bank), Saudi Arabia (to bankroll the occupations), "Palestine" (the nation not created, because it would continue to be under foreign occupation; but Friedman leaves open the possibility that there might be a Palestinian state at some point in the future, perhaps revisiting the issue after five years), and Israel. Oops - he forgot to consider this caveat: "The U.S. would be the sole arbiter of whether the metrics have been met by both sides" - I guess it's a "six state solution"? That'll go over well, on the day Saudi Arabia says, "We're done here, and now we should create a Palestinian State", and the U.S. says "no".

What of democracy, you ask? Well, I'm not sure that Friedman has ever cared about democracy. Palestinian human rights? Well... same answer. What's important to Friedman is that "This would be an Arab solution" that happens to resolve the conflict in a way 100% consistent with Friedman's own prejudices and desires, and that's good enough for him. The only question remaining is, does he know he's doing a slow dance with John Bolton and Daniel Pipes? I suspect so.

The Games Politicians Play

I don't know if Obama should scold the person who stuck the birth control provision into the stimulus bill, or thank them. The scolding should follow from the fact that this was supposed to be a pork-free, non-political bill that could pass with broad bipartisan approval. The birth control provision gave right-wing Republicans a talking point - they could point to it and say "What does birth control have to do with stimulation."

And that brings us to the possible "Thank you." Other than being fodder for an easy one-liner, Republican opposition has been unprincipled and dishonest. The fact is, the provision is good public policy and is consistent with the Medicare policies of a number of Republican governors. It would have saved those governors a ton of money and unnecessary hassle in obtaining waivers so that they could offer birth control benefits through Medicaid. And when the provision was dropped, the Republican answer was still "no" - giving Obama the opportunity to... do this:

“We’re not going to get 100 percent agreement, and we might not even get 50 percent agreement, but I do think people appreciate me walking them through my thought process,” the president said, as he left a meeting with GOP senators just off the Senate floor.

“I hope I communicated a sincere desire to get good ideas from everybody,” he added. “My attitude is this the first major piece of legislation we’ve worked on, and that, over time, some of these habits of consultation and mutual respect will take over, but old habits die hard.”

The shoe is on the other foot. The Republicans were ignoring public policy in favor of a talking point, leaving Democrats to explain why the birth control provision belongs in a stimulus package and makes good sense. Now the talking point is gone and the Republicans are left to sputter things like "We need more tax cuts" or "It's unfocused... not that we have any better ideas".

Obama was placed in an awkward position by the legislators who stuck the birth control provision into the stimulus bill. That measure was inconsistent with his stated goals for the bill. But to ask for its removal opened him up to attacks from the left, accusations that he's selling out women's health. While it's standard Washington fare to stick appropriations like this into "must pass" legislation, this really wasn't the time. I hope that Democratic party leaders have a bit of a sit-down after this, to discuss how they might avoid shooting the President and themselves in the foot over the next two years. Meanwhile, they should work to get a similar appropriation passed through, perhaps, a bill directing some aid or assistance to the states or updating Medicaid rules.